Runaway Spending Brings Crisis in Local Governments
APRIL 01, 1959 by LAWRENCE SULLIVAN
Mr. Sullivan is Coordinator of Information of the U. S. House of Representatives.
All local government in the
The current deficit in
With a budget of $2 billion for
An official study in
Other states seeking new revenues to avert 1959 deficits are
Washington, D. C. is no exception to the rule for cities. Early in January a committee of the House of Representatives warned the commissioners for the
A 1957 survey by the Federal Reserve Bank of
Almost without exception since 1953 all local and state government units in
This Federal Reserve study relates the stormy meeting of a local school board which demanded an immediate new school.
"But ends barely meet as it is," the treasurer interrupted. "How are we going to pay for a new building? We still owe a lot of money on the gym we built in 1953. We’ll have to have higher taxes before we can take on anything more."
"I don’t think the public will stand for more taxes," another member of the board interjected. "We’ve already raised taxes twice, and people are beginning to grumble."
U.S. Budget Director Maurice H. Stans tells of a meeting to discuss a new bridge in the
In 1946 state and local spending was only 18 per cent of all governmental spending in the
Three states in the Northeast and all their cities over 25,000 population went into the red by a total of $1.4 billions during the four fiscal years, 1953-56 inclusive.
Growing deficits in
Population increase, of course, justifies some annual increase in local budgets. Since 1946 city and county populations have increased by roughly 25 per cent on national averages.
In most urban areas, per capita income has increased upwards of 60 per cent since 1946. There is hardly a community in the country which could not afford to sustain normal growth in public services out of current income.
But what community can cover the pinch of inflation, when it costs $2.46 today to duplicate what $1.00 brought in new construction in 1945?
In 1945 hospital construction was estimated on the basis of $10,000 per bed. Today’s hospitals are calculated on the basis of $25,000 per bed.
"Charge it!" appears to be the guiding mood of the city fathers everywhere.
Thus, budget demands have far exceeded, percentage-wise, both population growth and improvement in per capita income. Extravagance approaching public profligacy at the state and local levels is another grave factor in today’s fiscal crisis. Local taxpayers must take matters in hand. In many areas, grumbling taxpayers already are looking to their political powder horns.
A revealing incident epitomizing the
Many suburban counties across the land today face critical shortages of schoolrooms. Yet scores of these same counties already have launched junior colleges, extending public education through two or four years of college, while some of their first and second grades still are on split-shifts, or housed in quonset-type tempos.
Roads and Streets
New roads and streets necessarily deferred during the wartime restrictions on building materials, create another major problem in local finances. Since the war, auto registration has doubled in most states. But no community has yet caught up with this growth, plus the backlog of streets and highways neglected during the years 1941-46. And all this highway development postponed during the war then fell on top of a mountain of deferred extensions accumulated during the depression years 1932-42, when most cities and counties maintained their fiscal equilibrium only by avoiding all expansion and renewal of streets, alleys, and highways.
In most areas, however, these deferred highway demands overlapped similar wartime backlogs in hospitals, schools, waterworks, and fire prevention. Trying to catch up all at once, during the last decade, with 25 years of deferred demand plus a 25 per cent population increase presents the raw skeleton of today’s national crisis in local finances.
First Things First
Every state and every local board faces the stern task of perfecting a slate of orderly priorities on public improvements. No community can do everything at once—today’s controlling mood.
Extravagance must be curbed through alert public auditing committees of taxpayers. With federal aid available in virtually every facet of local operations, the tendency to conceal real costs from local taxpayers is becoming a dangerous national habit.
Trick budgets are strong encouragement to runaway spending. Hardly a city, county, or state in the
It should not be necessary for citizens to hire professional CPA’s to find out what their local budgets add up to from year to year.
Honest budgets, and straightaway accounting statements published monthly by legal requirement, would permit the taxpayers to know what their master planners are doing to them from month to month.
In many urban areas today new apartment buildings are being constructed which yield to the local government roughly $150 a year per unit in taxes. But each apartment gives, on national averages, 1.8 pupils to the public school system. Each pupil costs the county about $200 per year. So each apartment adds $360 a year to the school budget, and contributes approximately $150 a year in taxes ! This is jocularly called "urban renewal."
Such is the road traveled today by literally thousands of growing communities—the very core of the ever-increasing wail for more and more systems of federal aid.
But with the federal establishment currently in the red at $12 billion a year, there are no longer any untapped revenues, anywhere, to supply the local deficits.
Total taxes in
Classical theories of taxation teach that no community can sustain itself in a state of solvency when the total tax burden exceeds 20 per cent of the gross product. Americans have been paying more than 20 per cent since 1940. And today state and local expenditures combined are increasing by more than 10 per cent a year, and state and local debt since 1940 has increased at the average rate of 12 per cent per year.
Congressman Wilbur D. Mills of
Only one figure need be cited to explode this theory, Congressman Mills insists; total public debt has increased steadily from $38.7 billions in 1932 to $333 billions at the end of 1958.
During the same period, gross national product has increased from $56 billion a year to the present $450 billion.
During the last quarter-century our gross national product has been multiplied by 8 but total governmental expenditures have been multiplied by 10.
Learning to Say "No!"
Only effective public disciplines can stop this headlong rush toward inflation, national bankruptcy, and chaos.
Obviously, we are all in for some stern local budgets.
Somehow, we must devise, at every level of government, a system of buying only what we can afford.
Economists have recognized since history began that there is no end of human wants. Only the disciplines of civilization can hold public spending within the limits of community resources. Taxpayers are now aware that many of the welfare-state luxuries devised during the last quarter-century are still carried on the cuff of the public debt.
True, some one group in every community regards each program of public service as indispensable to human felicity. Public belt-tightening means simply that each community must somehow arrive at a solid public judgment on what the local treasury can afford. Tested by this standard, every program must have a controlling relative importance. And that is where the public belt-tightening must begin—at the first program, or extravagance, the community decides it cannot afford.
There is an ancient adage in political science which teaches that any government big enough to give the folks everything they want is big enough to take away everything they’ve got.
Local budgets are more than a fiscal problem, more than an economic issue. Balanced budgets today are a moral issue of the first order.